Background
The Supreme Court has held that a statutory demand notice issued under Section 138 of the Negotiable Instruments Act, 1881 cannot be treated as invalid merely because it was received by a family member of the cheque drawer instead of the drawer personally.
A Bench of Justice Ahsanuddin Amanullah and Justice Manmohan set aside a Kerala High Court judgment that had overturned a cheque dishonour conviction on the ground that the statutory notice had been received by the accused’s mother.
The case arose from a complaint concerning a loan of Rs. 3 lakh. The cheque issued by the respondent was dishonoured, following which the complainant sent a statutory demand notice dated August 31, 2016, by registered post to the respondent’s correct address. The notice was received by his mother, Amina. The respondent neither made the payment demanded nor replied to the notice.
The Trial Court convicted the respondent on July 10, 2019, sentencing him to six months’ simple imprisonment and imposing a fine of Rs. 3 lakh. The appellate court upheld the conviction on February 16, 2023.
The Kerala High Court, however, set aside the conviction while exercising revisional jurisdiction under Section 397 CrPC. It held that the requirement under proviso (b) to Section 138 had not been satisfied because the notice had not been personally received by the respondent.
The complainant then approached the Supreme Court.
Legal Issue
The central issue before the Supreme Court was whether a statutory demand notice under Section 138 of the NI Act is valid when it is dispatched by registered post to the drawer’s correct address but is received by a family member residing at that address.
Section 138 of the NI Act requires the payee or holder in due course to make a demand for payment by giving a notice in writing to the drawer within the prescribed period after receiving information regarding dishonour of the cheque.
The Court considered the meaning of “giving of notice” and examined the legal presumption that arises when a notice is properly addressed and dispatched by registered post.
The Bench relied on the Supreme Court’s three-Judge Bench decision in C.C. Alavi Haji v. Palapetty Muhammed, which recognised that dispatch of the notice to the correct address gives rise to a presumption of service. The drawer can rebut that presumption by establishing circumstances such as an incorrect address, lack of knowledge that the notice had reached the address, or an incorrect postal endorsement.
Court Ruling
The Supreme Court held that the complainant is not required to prove that the drawer personally received or consciously avoided the statutory notice once the presumption of service is attracted.
The Court observed that the requirement of “giving of notice” is satisfied when the notice is dispatched to the correct address. The burden then shifts to the drawer to rebut the presumption by showing that the address was incorrect, that the drawer had no knowledge of the notice being brought to the address, or that the postal endorsement was incorrect.
The Bench also examined the earlier Supreme Court judgment in M.D. Thomas v. P.S. Jaleel, where a conviction had been set aside after the statutory notice was received by the drawer’s wife rather than the drawer himself.
The Court held that M.D. Thomas had been decided without considering the binding principles laid down by the larger Bench in C.C. Alavi Haji. It therefore treated the decision in M.D. Thomas as per incuriam.
Applying these principles to the present case, the Supreme Court found substantial material establishing that the notice had been sent to the respondent’s correct address. The same address appeared in the court summons, vakalatnama, appeal and revision proceedings. The respondent had also not disputed the correctness of the address in his statement under Section 313 CrPC.
The Court further noted that there was no case that the respondent and his mother were living separately or that receipt of the notice by the mother could not reasonably have brought the notice to the respondent’s knowledge.
The respondent therefore failed to rebut the presumption of service. The Supreme Court allowed the appeal, set aside the Kerala High Court’s judgment and restored the Trial Court’s conviction and sentence of six months’ simple imprisonment with a fine of Rs. 3 lakh.
Implications
The judgment clarifies that personal receipt of a Section 138 NI Act demand notice by the cheque drawer is not, by itself, a mandatory requirement when the notice has been properly dispatched by registered post to the drawer’s correct address.
However, the presumption of service is rebuttable. A drawer can still establish that the address was incorrect, that the notice did not come to their knowledge despite being sent to the address, or that the postal endorsement was incorrect.
The ruling also reinforces the authority of the three-Judge Bench decision in C.C. Alavi Haji and clarifies the legal position following the Court’s treatment of M.D. Thomas as per incuriam.
The judgment adds clarity on the requirement of statutory notice in cheque dishonour cases and the presumption of service arising when the notice is dispatched to the drawer’s correct address.
Case: Sainaba v. State of Kerala & Anr.
